Econ Notes 2 - Macroeconomics Ten Principles How People Make Decisions 1:52:00 PM o People make tradeoffs to get one thing you must get something

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Macroeconomics 04/09/2007 12:52:00 Ten Principles  How People Make Decisions o People make tradeoffs to get one thing you must get something else. People must  trade one goal with another  o Opportunity Cost The cost of something is what you have to give up to get it. The next best alternative you give up to get it o Rational people think on a margin  for a decision to make sense the marginal benefit must  outweigh the marginal cost o People respond to incentives – behaviors change when costs or  benefits change How The Economy Works as a Whole o Trade can make anyone better off Trade allows someone to specialize in areas where they excel Ricardo’s Theory of Comparative Advantage  Greater variety of goods or services o Markets are usually a good way to organize economic activity
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This note was uploaded on 04/07/2008 for the course ECON 112 taught by Professor Howard during the Spring '08 term at Conn College.

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Econ Notes 2 - Macroeconomics Ten Principles How People Make Decisions 1:52:00 PM o People make tradeoffs to get one thing you must get something

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